Menu_23_Feb_11 - TODAYS MENU Wednesday 23 February 2011 I...

TODAY’S MENU: Wednesday 23 February 2011 I. BUSINESS A. Practice Problems 1. Chapter 12: 1-3, 7-10, 12, 15 II. SUBSTANCE A. Theory of the Firm: The Basics How business and sellers make decisions 2 questions to ask it: How much to produce, how much to charge—assume answer questions to reach goal (maximize profit) 1. Profit a. Definitions i. Total Revenue (TR) selling good dollars coming in from selling good ii. Marginal Revenue (MR)-selling more/less-to answer question need margin-change in total revenue/change in quantity -marginal revenue is the change in total revenue from selling one more unit of good or service iii. Total Cost (TC) (economic cost: both explicit and implicit) α. Explicit (accounting cost) -out of pocket cost or procuring or producing good -what you have to pay for -accountant will only do this β. Implicit-dollars not coming into pocket because decided to peruse another job iv. Marginal Cost (MC)-marginal cost is the change in total revenue from producing one more unit of good or

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